HDFC Bank fired Sampath Kumar, Harsh Gupta, and Payal Mandhyan for allegedly mis-selling Credit Suisse AT-1 bonds, misleading NRI clients into transferring FCNR deposits to Bahrain.
The country’s largest private lender, HDFC Bank, has fired Sampath Kumar, group head of branch banking, along with two other senior executives for their alleged involvement in the mis-selling of additional tier-1 (AT1) bonds of Credit Suisse, two people with direct knowledge of the matter said.
The two other executives who were terminated include Harsh Gupta (Executive Vice President, Middle East, Africa, and NRI onshore business) and Payal Mandhyan, (Senior Vice President).
Gupta and Mandhyan were suspended from the bank in January last year pending the results of the probe into the alleged mis-selling of debt investments in the Dubai branch.
An email sent to HDFC Bank seeking an official confirmation did not elicit any response.
“Basically, whatever happened was the lookout of Sampath. Even if he hadn’t actively mis-sold, it was his oversight. Harsh and Payal were actively involved in this mis-selling,” said a senior executive at the bank, wishing not to be named
The AT-1 buyers — most of whom were of non-resident Indian (NRI) origin — of the bank had alleged that the executives of the bank had deceived them into transferring their foreign-currency non-resident (FCNR) deposits from India to Bahrain.
“In the Bahrain branch, they convinced us that they were selling fixed-maturity assured return bonds. They took my signature on the blank paper,” an AT-1 bondholder said.
The bank’s executives allegedly mis-sold the AT-1 bonds of Credit Suisse — which are perpetual — as fixed-maturity bonds.
The AT-1 bonds — amounting to $20 billion — were initially written off as part of the Credit Suisse bailout package. However, the Swiss Federal Administrative Court deemed the write-off “unlawful,” a decision that FINMA and UBS are currently appealing to the Supreme Court.
Dubai Financial Services Authority (DFSA) — the financial services regulator for — had barred the bank from onboarding new clients from the Dubai branch. The questions sent to DFSA didn’t elicit any response.
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